Specialist life/risk advisers have rarely been busier but less life insurance business is being written for the simple reason that many older risk advisers are leaving the industry and fewer generalist advisers see the economic benefit in writing risk business.
That is the bottom line for the Australian life insurance industry at the start of 2021 which stands in stark contrast to the situation in 2008/09 when amid the confusion and volatility of the Global Financial Crisis generalist advisers turned to advising on risk because it represented a solid revenue stream.
Around 18 months out from the Australian Securities and Investments Commission (ASIC) producing its review of the Life Insurance Framework (LIF), it is now clear that less business is being written simply because there are fewer advisers.
And for some generalist advisers the economic arithmetic of writing risk simply does not add up because of the limitations imposed by the overall regulatory requirements and the commission caps imposed by the LIF.
The story has been underlined by the latest data from specialist life/risk actuarial fir, Plan For Life which revealed inflows into the Lump Sum sub-market grew by just 0.3% over the past year with mixed company-level results.
Among the market leaders, ClearView (4.6%), Zurich (3.3%), TAL (2.1%) and MLC (1.3%) experienced positive percentage increases in their Inflows with the remaining insurers reporting minimal or negative growth.
Synchron director, Don Trapnell confirmed that specialist life/risk advisers working within the licensee were busy but that, overall, less business was being written.
Bombora Advice principal, Wayne Handley told a similar story stating that specialist life/risk advisers were busy and in many instances their workload was increasing as non-specialists advice firms referred clients to specialist risk advisers.
“It’s a two-speed economy for us,” Handley said. “People who have the specialist capabilities are busy because of the referral work coming from those who don’t.”
“I’ve never seen opportunities more robust than they are at the moment but we’re losing guys because of the Financial Adviser Standards and Ethics Authority (FASEA) and regulatory requirements,” he said.
Trapnell, who has been a long-standing advocate of specialist life/risk advisers being subject to different education requirements to general advisers, said the real test would come when the time ran out for life/risk advisers to sit the FASEA exam.
“Some of the old and bold are simply not going to do it [the exam],” he said.
This was echoed by Association of Financial Advisers (AFA) general manager, policy and professionalism, Phil Anderson, said there was a real question mark over how many specialist life/risk advisers would do the exam or leave before time expired to do so.